Maintenance capital expenditure is the portion of a company's capital spending that only keeps existing operations running at their current level — replacing worn equipment, repairing a facility — as distinct from growth capital expenditure, which expands capacity or output.
No Canadian statute or regulator defines the split or sets a threshold for it. It is a diligence and valuation construct, not a legal one: a buyer normalizing a target's EBITDA has to decide how much of the reported capital spending was genuinely required to sustain the business at its current level, because only that portion realistically constrains the free cash flow available to service acquisition debt — growth capex is, by definition, discretionary spending the buyer can choose to fund separately or not at all.
That normalization sits squarely inside the professional standard of care a valuator is held to. Under the CBV Institute's Valuation Practice Standards effective January 1, 2026 — Practice Standard Nos. 100, 110, 120 and 130 — a valuator's report and its scope of work must be properly supported and disclosed; separating maintenance from growth capex inside an EBITDA adjustment is exactly the kind of judgment call those standards require a CBV to document, not invent.
The split also feeds directly into how a lender sizes the deal. Deavo's own capital-stack commentary describes typical acquisition-lending coverage tests of roughly “1.25× on SDE” or “1.30× on EBITDA,” described as illustrative market bands rather than a published rate — and a debt-service coverage ratio is only meaningful once the earnings figure it is tested against has already been normalized for the capex the business can't avoid.
A buyer diligencing a manufacturing target finds it spent $900,000 on capex last year: $300,000 replacing worn-out production equipment on roughly the same cycle it always has, and $600,000 building a new production line to make a product the company didn't previously sell. Only the $300,000 is maintenance capex. A buyer normalizing EBITDA for a debt-service calculation treats the $600,000 as a discretionary growth investment funded separately — not as an ongoing drag on the cash flow available to service the acquisition debt.
See also: Purchase price allocation · Share purchase agreement · Earn-out.
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